May 9, 2012

If you are in need of some extra money, personal loans may be a good solution for you. Sometimes called an unsecured loan or an installment loan, these types of loans allow you to borrow cash quickly and use it for whatever you want. The terms of the loan are almost always fixed, meaning the interest rate, size of the payments and number of payments will not change.

Finding Good Personal Loans
Although in today’s market loans are harder to get, it is still possible to get a good deal on a loan. To do so you must take some time to shop around. Treat it like a major purchase. Compare several different lending institutions. Talk to the lenders, and make sure they explain their terms in “plain English”.

There are a number of factors that affect the cost of a loan, so make sure to compare them using all of these to get the best deal:
• What is the interest rate? To compare apples to apples make sure the interest rate is expressed in the same period for each loan, such as the “annual percentage rate”, or the monthly rate. It doesn’t matter which rate period you use as long as you use the same one for every loan.
• What is the duration of the loan? This refers to the number of payments required to pay off the loan. More payments means you won’t have to pay as much per payment, but the total interest paid over the life of the loan will be greater.
• How much is the monthly payment? This one goes hand in hand with the previous question.
• How much interest will be paid over the life of the loan? You can calculate this with the answers to the above three questions, but you can also ask the lending institution.
• What fees are associated with the loan? Sometimes there are origination fees, late fees and application fees. These add up and can quickly turn a good loan into a bad one.
• Are there fees for paying off the loan early? If you think you will want to pay the loan as fast as possible you’ll need to know the answer to this question.
• How late is late? Sometimes lenders have a built-in grace period before you are dinged with a late fee.
• What payment options do I have? Make sure you can make payments in the way you are most comfortable, whether by check, by phone, online, by credit card or ACH bank transfer. Also, make sure there are no fees for using that method of payment.

These are the most important factors to consider and use for comparison. There are a number of online loan calculators that allow you to enter these kinds of numbers and get all the financial information you need to make the right decision.

Getting Favorable Loan Terms
If you need cash right away there isn’t much you can do to change the terms you are going to get. However, if you have some time, or if you simply want to start working towards better marketability, here are the biggest factors lending institutions consider when determining loan terms:
• Long-term employment. If you were out of work for the last year and just got a job last week, lenders will consider you a risky investment. If, on the other hand, you’ve been gainfully employed by the same company for the last ten years you will be regarded more favorably.
• Current financial health. Of greatest interest are your income, your savings level and your current debt. Particularly, if your debt is a large percentage of your income the lenders may feel you have already borrowed enough for now.
• Credit score. If your credit score is above 650 you should be in good shape, and the higher the better.

Where to Get Personal Loans
You have a number of options today for seeking a loan. You can certainly try the local branch banks in your neighborhood. Many people feel most comfortable doing business with a lender where they can walk into a building and talk to a real live person, even if the terms of the loan are not quite as good as elsewhere. Oftentimes, smaller lenders charge fewer fees and give you less red tape in an effort to win your business.

Online banks are also a good option. These are usually large banks that are national or international in scope. They have to offer extremely competitive terms because they are in direct competition with virtually every other financial institution. There are a lot more lenders available to you online than are within driving distance of your home. One downside is that you may have a hard time finding a physical building to visit. But, if you do all of your banking online anyway, an online lender should be no trouble for you.

You can also find a number of online quote systems, where several companies bid on your business and you can compare each of them side by side. This simplifies things a great deal. If you use this method you should still take the time to investigate each potential lender individually to make sure what you see is what you get.

Protect your credit by making all of your loan payments on time. The best way to do this is to set up automatic payments of the loan. This will ensure you never have to worry about a late or missed payment.